Life Insurance Q&A with Chris Earle

//Life Insurance Q&A with Chris Earle

Life Insurance Q&A with Chris Earle

Chris-Earle

In this following article we aim to go through below some frequently asked questions about Life Insurance covers with our resident Life Insurance expert, Chris Earle.

A bit about Chris

Chris joined Bruce Life in 2013 and brings a wealth of experience in the life insurance and wealth management industry.

Chris began his career in South Africa before emigrating to Australia in 2000 and taking up senior roles with the Commonwealth Bank and National Australia Bank.

Chris specialises in providing continuation and succession planning strategies for SME business and can provide advice on a wide range of life insurance products.

Chris Earle is an Authorised Representative of NEO Financial Solutions AR Number – 338 882

Let’s get started…

Q: What types of life insurances are there?

A: Life insurance is to ease the financial burden that can impact you and your family in the event of an unforseen serious illness, disability or death.

 

Q: Are there different types of cover that make up life insurance?

A: Yes, life insurance covers 5 key areas of cover:

Q: What is Life Cover (Life Insurance)?

A: Life insurance provides a lump sum benefit payable to the policy owner on the life assureds’ death, or in some cases on the diagnosis of a terminal illness. This lump sum could be used to pay debts &/or provide a lump sum that can be used to create income, helping your family maintain their current lifestyle.

Q: Is Life insurance is flexible?

A: Yes it is you can change the level of cover to suit your financial needs, meaning that the level of cover can be adjusted in line with levels of debt & family needs.

Q: How can I pay for my Life Insurance cover?

A: Life insurance can be paid out of your super fund if you have cash flow concerns. I would recommend speaking with a life insurance adviser for a more detailed explanation.

Q: Is there anything I need to be aware of?

A: Yes there are a few thing you need to consider.

  • You should ensure your insurance cover is adequate for your needs. Under-Insurance can represent a major problem.
  • Changes in your personal circumstances (i.e. taking on additional debt) often necessitates higher insurance levels.
  • Benefits received via a superannuation policy may be taxed.
Q: What is Total & Permanent Disability (TPD) Insurance?

A: TPD insurance provides a lump sum paid if you become totally & permanently disabled. As with Life Insurance this lump sum could be used to pay debts & / or provide a lump sum that can be used to create income, which can help you maintain your lifestyle. TPD insurance can be bought as a standalone product or as a linked extension to a Life & / or Trauma policy.

Q: Are there different types of Total Disability insurance?

A: Yes there are various definitions of total & permanent disability, and your occupation will determine the type of TPD you will be eligible for.

  • Own Occupation
  • Any Occupation
  • Non-Working (Activities of Daily Living)

Q: Can you explain a bit more about the types of TPD covers?

A: With Own Occupation the insured must show that they have a total & permanent disability that prevents them working in their own occupation which they disclosed when applying for this cover.

‘Own Occupation’ is a more liberal definition of disability, because even if you can work in another occupation, you may still be eligible to receive disability benefits. Because it is relatively easy to qualify for benefits under this definition of disability, insurance companies are limiting the availability of this type of coverage. Own occupation coverage is often more expensive, & may only be available to individuals who have a clean medical history & work in a relatively risk-free environment.

And with Any Occupation the insured must show that they are totally & permanently disabled & unable to work in their usual, or any other occupation for which they are reasonably suited by their education, training or experience.

‘Any Occupation’ is often the cheaper option; however it can be more difficult to meet the requirements of this type of disability definition.

Activities of Daily Living – Payment of benefits under this definition are based on the life insured through sickness or injury can’t do 2 of the 5 activities of daily living & will never be able to do so again. (Bathing, Dressing, Toileting, Moving, Eating)

Q: is there anything I need to be aware of?

A: Yes there are a few thing you need to consider.

  • You should ensure your insurance cover is adequate for your needs. Under-Insurance can represent a major problem.
  • Changes in your personal circumstances (i.e. taking on additional debt) often necessitates higher insurance levels.
  • Benefits received via a superannuation policy may be taxed depending on the end beneficiary
Q: What is Trauma / Critical Illness Insurance?

A: Critical illness insurance (also known as trauma insurance) provides a lump sum benefit if the life insured suffers a ‘critical condition’ as defined by the insurance provider. Critical illness cover is designed to help you financially recover from a trauma event, or other life threatening conditions. This lump sum can be used to help pay medical costs, reduce debts or supplement an income.

Q: What are some of the conditions and how many are there?

A: Some of the prescribed illnesses may be, but are not restricted to: heart attack, stroke, cancer, paraplegia, multiple sclerosis, Parkinson’s disease, chronic liver, lung & kidney disease & Mental Illness, most insurers have around 45 defined events. Trauma insurance can be bought as a standalone product or as a linked extension to a Life cover.

Q: Is there anything I need to be aware of?

A: Yes there are a few thing you need to consider – one would be:

  • You should ensure your insurance cover is adequate for your needs. Under-Insurance can represent a major problem.
Q: What is Income Protection?

A: Income protection insurance (also known as salary continuance) is designed to provide a regular income in the event that you are unable to work due to sickness or injury.

Q: How much will it cover me for?

A: Income Protection will provide you with a monthly income of up to 75% of your current taxable annual income should you be unable to work due to sickness or injury. The benefit paid can be used for any purpose so can be used for living expenses, home loan repayments, regular investment & other costs.

Q: Do I have to wait and how long will it cover me for?

A: Income protection insurance provides this regular income, after a specified waiting period, (most commonly 14, 30, 60 or 90 days) and has a benefit for a period of several years or to a specified age. (2, 5 years or to age 70 depending on occupation) Income can be determined and then insured under an Indemnity or Agreed Value contract.

Q: What are the differences between Indemnity and Agreed contracts?

A: Indemnity contracts offer payments whilst on claim of an amount up to 75% of pre-disability income (usually last 12 months of income); whareas an Agreed Value contract guarantees payment of the agreed sum insured irrespective of the actual pre-disability income.

Q: Is there anything I need to be aware of?

A: Yes there are a few thing you need to consider.

  • The shorter the waiting period & the longer the benefit payment period, the more expensive the cost.
  • Income protection insurance is important when borrowing to invest (gearing), as it can help meet interest repayments if you are unable to work due to illness or injury
  • You should ensure that your insurance cover is adequate for your needs. Under-Insurance can present a serious problem.
Q: What is Business Expenses Insurance?

A: Business Expenses Insurance allows you to insure up to 100% of allowable expenses, which your business is likely to incur if you become totally disabled. It has been specifically designed for self-employed people and is planned to pay for a period of up to 12 months.

Q: What are the allowable expenses?

A: Typical business expenses covered may include:

  • Office rent;
  • Regular business mortgage repayments or business loan instalments;
  • Equipment leasing costs;
  • Electricity, gas, water & telephone payments.
  • Property rates & taxes
  • Cleaning & laundry
  • Remuneration & associated costs of non-income generating employees
  • Leasing costs of equipment or motor vehicles
  • Business insurance premiums
  • Accountancy fees
  • Subscriptions to professional associations
  • The reasonable book value of the depreciation of plant & equipment

Q: What would you say to the common belief …“but it won’t happen to me?

A: The common belief that ‘it won’t happen to me’ often results in many people having a sound plan for wealth creation, but not an adequate plan to protect the very thing that generates the wealth – YOU!

How death, disability or serious illness affects your ability (or your family’s ability) to maintain your lifestyle goals & objectives will depend on the protection strategy that you have in place.

Life insurance can provide financial protection for your family’s ongoing living expenses and can be structured to provide a lump sum payout to clear your debts if you die or become totally disabled, and can provide financial assistance for dependants, & Income protection for an regular monthly payment for temporary disability.

 

Q: Can you explain how the premiums are calculated?

A: Premiums are calculated each year and generally increase as you get older. Premiums take into account age, gender and smoking status, and occupation. In some cases there may be ‘loadings’ on premiums as a result of a pre-existing medical conditions (e.g. Crohn’s disease) or for physical reasons (e.g. a person may be considered overweight or obese) or past times and activities.

Most premiums are guaranteed renewable. This means they can be renewed automatically irrespective of the status of your future health.
Premiums are subject to change at any time in line with the insurance company’s assessment of risk and inflation. Insured persons must be given at least 30 days’ notice if any change in premium is to take place.

 

Q: Are there any payment options?

A: Many products will offer you a choice of two premium options, and you can pay monthly, quarterly, half yearly or yearly.

Q: Can you explain the two premium options that you mentioned?

A: The 2 types of premiums styles are:

  • Stepped premium will increase each year according to your age, sum insured, inflation & the policy fees.
  • Level premium is initially more expensive but will not increase by age, it will still increase by inflation, if the sum insured is altered or if level premium rates are revised by the insurer.

The level premium option will generally expire at a specified age. Level premium can work out to be the more cost effective option if the policy is held for a long period.

Q: Who can I speak with to discuss my Life Insurance needs?

A: We recommend that you speak with a Specialist Life Insurance Adviser to discuss which types of cover and what levels of cover is suitable for you.

2016-10-26T16:39:29+00:00 August 23rd, 2016|